Understanding How Trust Deed Investments Are Secured

Trust deed investing has been around for several decades, yet today it seems few are familiar with how trust deed investments work or its edge over other investment options. Deed of trust investment offers one of the best risk-adjusted yields, presently available when compared to other major options:  private equities and stocks. It is vital that you understand how a trust deed investment is secured.

When making trust deed investments, the deed of trust recorded against the borrower’s property title is what secures the investor's investment. In a trust deed agreement, the borrower makes the property transfer, in trust, for the trustee who is an independent third party, usually a firm or company (TDIC or trust deed Investment Company as what they are called).  The trustee then manages and holds the property title on behalf of the investor/lender and then either of the following happens:

The borrower will be able to get back the trust deed once they satisfy all of the stipulations that have been stated in the promissory note. On the other hand, if the borrower goes into default, the property will be marketed or sold by a trustee to a bidder or get the property title. The foreclosure sale usually satisfies the debt that is owed to the investor.

Always ensure there's enough or big equity percentage as this safeguards your trust deed investments just in case you need to foreclose on the property and sell it to recoup the borrowed funds, any interest that was not paid out, plus any other fees used during the process. Trust deed investments within a margin of safety can offer good quality, safe returns.